Monthly Archives: February 2014

Daniel Yergin’s IHS is just about the most influential energy research house going. Yergin parlayed his talents as academic into a 1992 book “The Prize”, proving how on energy fundamentals he and his associates are the smartest guys in the room. IHS’s reputation is such that even those who rarely think about energy call on his opinion first, and take it very seriously when they hear it.

This underlines how much influence IHS’s report on German power “A More Competitive Energiewende” released on February 27 is going to have throughout Europe – and beyond – for several key reasons

The energiewende, or energy transformation, has been such a totemic vision of the future to greens worldwide that the word has almost seamlessly made the leap to everyday English language. The energiewende is brandished as an example of not only the noble aims of renewable energy, but how they can, albeit with substantial initial government intervention, show a path towards a world where industrial society and renewables can co-exist. It’s cited as template for similar transitions in areas as different as the UK, (Zero Carbon Britain), a Stanford study on powering New York entirely with zero carbon energy, and even a WWF study that proposes the same thing for China.

An unintended problem of natural gas abundance will be creating new uses for it, and there are several emerging technologies that appear to hold more achievable uses for carbon than simply throwing it away as waste product or burying it.

From the very first at No Hot Air I have been truly deeply skeptical of Carbon Capture and Storage. But on the other hand, there are a lot of otherwise sane geologists I meet who promote it. It seems very problematic to capture CO2 in the first place and storage is surely uninsurable. The only actual application in the small number of demonstration projects currently operating, is to use CO2 in Enhanced Oil Recovery. Taking carbon out of coal is good, but the carbon and financial, economics of then using it to then produce more fossil fuels strikes me as the problematic meeting the pointless. The other alternative is to store it. If we can’t get the public to accept natural gas storage, how are we to convince them about CO2 storage, which could engender even more serious issues than nuclear waste. Firstly, the quantities would have to be vast to make any difference, and it basically avoids the problem today and asks future generations to shoulder the burden. What would happen if millennia in the future some once in a millennia seismic event causes a storage site to belch hundreds of years of CO2 into the atmosphere for only one example?

Many observers, supporters and detractors alike of onshore natural gas and oil, talk of the US example of private mineral rights as providing an example for the emergence of US shale while at the same time providing yet another support for the the “it will never happen here, so let’s not bother trying” school.

Also at the same time, as Laszlo Varro of the International Energy Agency recently pointed out, US producers may be becoming complacent about public acceptance under their own backyards. I’ve consistently said common resource ownership could solve more problems than it raises in Europe. Could it also solve some US issues?

Are we underestimating the productive potential of UK shale gas? I’m sometimes accused of being as unrealistic in my assessment of the potential of shale gas outside the US as the fractivists are in their assessment of the dangers.

However, given the reassessment on the upside by the IEA and CSIS this week, along with another event Friday at Rice University in Houston, it’s only logical to refresh the conventional wisdom on the UK potential.

Could the US be on the threshold of becoming a world energy powerhouse? The US is not currently exporting LNG, and isn’t allowed to export crude oil. But it can export refined products and there have been surging exports of diesel to Europe, gasoline to South America and even jet fuel deliveries to Europe. Throw in LPG and ethane, (a new agreement for Marcellus ethane was signed recently to export US ethane to Ineos in Europe starting next year), and it’s not too surprising to learn that US energy exports have now surpassed the value of goods from export giants like Boeing, Caterpillar and Microsoft.

Energy exports have a double benefit as they lower the demand for imports at the same time that US production takes $40 billion off the import bill.

One reason for the evolution of No Hot Air, from a site dedicated to increasing awareness and knowledge of shale gas, to NaturalGas2.0, is based on my view that shale itself is becoming normalised. While we’re not yet at the stage that almost every UK newspaper stops reporting it as “controversial”, three stories this week point to a normalisation of the debate away from shale to just plain gas.

The Chatham House rule was invoked, at a meeting in the House of Commons on Tuesday of the All Party Group on Energy Costs. Invoking the rule, which means that I can report what was said, but not who said it, seems rather pointless in that there were only two speakers, Ashutosh Shastri of EnerStratConsulting and Lord Deben, formerly known as John Gummer MP, who is the chairman of the Committee on Climate Change. I’ve known Ash for some time, but to be fair, he’s not a household name, so bear this in mind when I give you an idea of what was said, without committing that unspeakable UK journalistic sin of breaking the Chatham House rule.

The very first thing that pops into the popular mind about gas or oil drilling is that it’s ugly. With very little to go on in the UK, it’s hard for anyone to state how big a problem it would be, and especially important, how long would it last.

That hasn’t stopped some people, using either photoshop or pictures of vertical wells in Colorado or Australia presenting their picture of what actual disruption might be. One example is this from the UK Green Party using a picture of Australia:

Iran has been off the world stage since 1979, except in a complex role where they willingly played devil and most everyone else enthusiastically applauded the drama, although rarely for the same reasons. During this absence the world natural gas trade has been transformed everywhere else. We didn’t even have US natural trading in 1979. LNG was a sleepy little sideshow where Japan enriched the Sultan of Brunei and a few others in in Indonesia and Malaysia. Norway only produced 20 BCM in 1979 against 114 in 2012. The UK produced 36, and is almost back at that level, but had produced over 100BCM as recently as 2003. Qatar LNG didn’t exist and of course not even George Mitchell was thinking about fracking.

In 1979 we still had a Berlin Wall, China was one of the world’s poorest countries and even the Sony Walkman was still a couple of years away. Even the high tech fax machine had yet to evolve.

Imagine a country where the natural gas industry doesn’t have to be thankful for a few throw-away lines in the State of the Union address, doesn’t have a wide range of opponents in Congress, the Senate, state legislatures and actual local bans not only in New York State, or even in producing locations like Dallas and Colorado

That would be the UK. A country where the Prime Minister supports shale gas so eagerly that he tells world leaders at Davos about it. Natural gas is also supported by coalition partners and the opposition.

Imagine a country where it’s possible to pick up acreage, not in dribs and drabs via an army of landsmen, but in 80 sqKm (19,768 acres) blocks all at once.

That would be the upcoming UK Onshore Licensing round in June this year.

Imagine if the investment needed to get a license would be cents an acre. That would be the UK.

What a difference a year makes. In 2013, The European Gas Conference, held in Vienna every year, was full of conversation about securing supply, and as usual Gazprom, Qatar and South Stream were amongst those most eager to provide answers.

This year it was all about creating demand, but doing so in a new world where both US LNG and European onshore were looking to provide increasingly credible alternatives to the more mature suppliers on energy security.

On the demand side, the industry appears powerless before three trends: surging coal, surging renewables and European de-industrialisation. This winter is made even worse with mild temperatures in Western Europe adding to a fairly typical 14% drop in UK gas consumption in January. EU gas demand fell by over 70BCM last year (6.77BCFD) and something clearly needs to be done. It’s now clear that the industry now understands it’s all about coal. Rune Bjornson of Statoil described European coal as the elephant in the room that neither policy makers nor environmentalists are willing to mention even as we see the failure of EU emission levels to reach the “targets” that the same players insist are non-negotiable.